Record a Bad Debt or Account Unrecoverable

If you are unable to collect payment for items purchased, we suggest using the direct write-off method. 

The basic idea is that there needs to be a credit entry made to the accounts receivable (the customer) to remove the amount that will not be collected, and then a debit entry as an expense to report the amount of the loss to your business.

Step 1: Clearing the Account Balance

1. On the contact profile toolbar, click  Payment, then Post Payment.
2. From the Amount field, enter the amount owed or click  to zero out the account.
3. Under the Payment Type drop-down, choose Cash/Check.
4. In the Memo/Check# field, enter a note such as BAD DEBT.
5. Click  OK   .

After posting a payment to clear the account balance, a contact log entry will automatically be added.

Step 2: Create a Critical Reminder & Set Inactive

1. Click on the Notes tab of the profile, and under the Reminder section reference the bad debt with applicable information.
2. Check the Critical, create pop-up checkbox, to ensure you are alerted of the bad debt if there is ever any contact made.
3. Click on the Main tab of the profile, and under the Contact Information section, check the Email Unsubscribe and Inactive checkboxes. View
4. Click  Save, then close the profile.

Step 3: Add an Expense Entry

Ensure that you have an expense category already created that will be used to handle bad debts. As with any business expense, we recommend consulting with your tax adviser to assist with tax-related decisions.

1. From the Business Tools menu, select Expenses (or from the Reports - Tools group on the main toolbar, click  Expenses).
2. From the Expense toolbar, click   to create a new entry.
3. In the Pay To field, type BAD DEBT.
4. In the Memo field reference the contact's name and associated invoice number(s). 
5. From the Category drop-down menu, select the Bad Debt category.
6. In the Check # field, type BAD DEBT.
7. Enter the Date the account was written off.
8. In the Amount field, enter the amount being written off, then click  Save .